Google CEO Eric Schmidt says government regulation of Internet service providers (ISPs) is necessary. In fact, he said he thinks the entire concept of the Internet marketplace relies on it.

Schmidt spoke to conservative bloggers at the Republican National Convention on September 3 in St. Paul, Minn. He warned that if an Internet service provider were too large, it could use its size to create a “protected structure within the Internet” and suggested that would restrict competition – giving some content favorable treatment within its network.

“Let’s imagine the following scenario – who’s the largest Internet provider in the United States today, numerically? Let’s pick Comcast – whoever is the largest,” Schmidt said. “And let’s imagine that they were 80 percent of the market. They would be able to start to do proprietary extensions of protocols and they could eventually use a withholding of information to create a protected substructure within the Internet.”

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He reflected on Microsoft (NASDAQ:MSFT) as example of how that could happen. Schmidt’s comments about Microsoft come in the wake of Google’s launch of its own browser, Chrome – meant to compete with the newly launched versions of Microsoft’s Internet Explorer and Mozilla’s Firefox.

“Now you have to decide if you think that’s an okay outcome,” Schmidt said. “The Internet was based on the principle that that could not happen. You all know and this may also be controversial with this group – I’ve spent 25 years … with Microsoft, which has of course a very large platform market share – who did those kinds of techniques. We can debate whether they were correct or not, but where you come out on that often I think predicts your view on this.”

A d v e r t i s e m e n t

Opponents of Schmidt’s point of view argue such corporate control hasn’t occurred, and therefore the government should remain hands-off. However, Schmidt argued it is still necessary and justified for the government to intervene just in case a company was able to “get that level of control” over the Internet.

“So the issue is not – there’s no current behavior,” Schmidt said. “So Comcast for example, is not doing the scenario I’m describing. But you worry that when any company – including Google by the way – gets that level of control over something, it can do proprietary extensions. They can make it impossible for competition to occur.”

Last month, FCC Commissioner Robert McDowell warned that government involvement with ISPs and their networks could have a chilling effect and could even mean the possibility of an expansion of the Fairness Doctrine to the Internet.